Tanesco seeks 90% tariff increase

Electricity consumers in Tanzania will have to dig deep into their pockets to light their homes, produce goods and engage in other key economic activities if the application to raise the power tariff by 90 percent gets the nod.

The proposed rise would be implemented within three years—from October 2013 to 1 January, 2015.

The cash-strapped state power utility, Tanesco, has applied for a rise in the power tariff of about 68 percent effective 1 October this year.

On 9 November 2012, Tanesco applied for an urgent tariff rise averaging 155 percent across all customer categories. It would be effective on 1 January, 2012.

But the regulator, the Energy and Water Regulatory Authority (EWURA), granted Tanesco’s application to raise the power tariff by 40.9 percent, a move that led to a huge public outcry.

The move raised electricity prices to Sh118 for industrial consumers, up from Sh94, while medium scale and household tariffs rose to Sh132 and Sh273 respectively.

Tanesco spends between Sh359 and Sh537 to produce a single unit of electricity but sells the same unit at a price below production cost.

Now in a tight financial position, Tanesco wants its power tariff to rise by roughly 90 percent, according to the application lodged at the regulator’s office for approval last month.

In its application, Tanesco is requesting a tariff adjustment for three years as follows: 67.87 percent effective 1 October, 2013; 12.7 percent in 2013 effective 1 January next year and 9.17 percent from 1 January, 2015.

Yesterday, Ewura held a public hearing to seek views from the public as required by Section 19 (2) (b) of the EWURA Act, Cap 414.

In its application, Tanesco cited higher operation cost that exceed the company’s monthly earnings as they main factor behind the exorbitant tariff increment.

The increment, Tanesco claims, would enable it meet its operational costs and work on the capital investment programme.

It will also enable the firm to demonstrate its bankability to donors offering concessionary loans/grants and boost the capacity to meet system peak demand and also adequately fund research and monitoring to ensure a consistent and stable supply of electricity.

Tanesco’s monthly revenues between July and December last year stood at an average Sh94 billion per month but the power utility spent half of that money on capacity charges, with the biggest chunk going to Symbion Power—the company that inherited the controversial operations of Dowans Tanzania.

According to Tanesco’s financial analysis and forecast for the second half of 2012, capacity charges alone cost the state power utility a whopping Sh256 billion.

The state power utility further spent another Sh331 billion during the same period, an average of Sh55 billion per month, to buy electricity from private producers.

In January last year, Ewura’s board of directors approved an emergency tariff increase of 40.3 percent pending determination of the final tariff application that sought a 155 percent rise.

The application of the emergency tariff was then extended to January this year with the regulator opting to carry out a “Cost of Service study” which could be the basis for Tanesco’s multi-year tariff increment for the 2013 to 2015 period.

According to details gathered by The Citizen, a consultant, AF-MECADOS EMI from Spain, was engaged to develop “a rate setting methodology” for the electricity sector and a cost of service study for Tanesco.

The study proposed a cost reflective tariff rise of 33.8 percent for 2013 followed by a 0.85 percent rise in 2014 and 15.14 percent in 2015. But before issuing the order, the Energy and Minerals ministry advised Tanesco to shelve the tariff increment application submitted in 2011.